Engro Corporation Limited (ENGRO) posted consolidated earnings of PKR 6.8Bn (EPS:PKR 11.7) in 4QCY20, up 1.9x YoY today. This takes the aggregate profitability for CY20 to PKR 25.1Bn (EPS: PKR 43.6), up 52% YoY. Moreover, the company also announced a dividend of PKR 2.0/sh in the last quarter, taking the total pay-out for the year to PKR 26.0/sh.

Key highlights of the result are discussed below:

▪ Improvement in earnings during 4QCY20 is primarily on account of better profitability posted by subsidiaries, including EFERT (↑ 1.0x YoY) and EPCL (↑ 4.1x YoY).

▪ Net revenue declined by 15% YoY to PKR 66.3Bn in 4QCY20 mainly due to lower fertilizer offtake which dented EFERT’s revenue growth (↓ 36% YoY).

▪ Gross margins marginally improved by 1.0points to stand at 32% in 4QCY20 owing to improving margins of subsidiaries.

▪ The company also booked loss allowance on subsidy receivable from GoP of PKR 1.2Bn in 4QCY20. On the other hand, income from joint venture also clocked-in at PKR 0.8Bn, taking the total share of profits to PKR 2.8Bn in CY20, up 2.4x YoY.

▪ Finance cost increased by 21% YoY to PKR 6.5Bn; whereas other income jumped by 2.6x to PR 8.8Bn in 4QCY20.

▪ We maintain our BUY stance on the scrip with our Dec’21 TP of PKR 393.0/sh,which implies an upside of 27% from the last close.

Courtesy – BMA Capital Management Ltd